Europe Jet Seen Under Pressure as Refineries' Supplies Gain

Pressure on Europe's jet fuel market is forecast to mount in coming weeks as refineries exit turnarounds and ramp up supplies, Energy Aspects said today. Jet fuel yields at European refineries in the first quarter were at 8.7%, compared to 8.2% over the same period last year because of higher crude distillate unit utilization, the London-based energy consultant said in a monthly report in the middle distillates sector.

However with positive refining margins forecast into the fourth quarter and rising diesel demand supporting diesel cracks, refiners in Europe are unlikely to cut runs to support jet prices, according to the report. At the same time, refiners in the Middle East, the largest suppliers of jet fuel to Europe, are seen adding capacity.

Energy Aspects forecast refining margins for complex refineries in North West Europe to reach $6.50/bbl in the second quarter, the highest since at least the third quarter of 2012, data show, and up from $4.49/bbl in the first quarter. The margins are measured against Brent. The forecast is estimated to surpass
Singapore refineries' profits, estimated to reach $5/bbl, based on Dubai crude.

The European region has the world's biggest deficit of jet fuel. Energy Aspects projects that supplies of jet fuel in Europe, including Turkey, will fall short of demand by about 855,000 b/d in the second quarter. This will rise to 886,000 b/d in the third quarter, and peak at 981,000 b/d in the final three months of the year, the report said. The U.K. has the largest deficit this quarter, at 220,000 b/d, followed by Turkey at 218,000 b/d.

Jet fuel prices have averaged $577.78 per metric ton in 2015, OPIS data show. Profits to refine jet fuel at a refinery in North West Europe for sale in the Amsterdam-Rotterdam-Antwerp barge market, measured against rolling Brent, have averaged $14.46/bbl over that same time. Unlike the Energy Aspect figures, OPIS calculations don't include operating costs, which are subtracted from the spread to measure profits.

Europe is the world's third-biggest refining region, with 86 mainstream refineries and 720.9 million metric tons of operating capacity covering the 28 member countries, Norway and Switzerland at the end of 2013.